What are the types of life insurance?

There are several different types of life insurance policies. It’s important to choose a policy that fits well with your situation and objectives. Here’s a summary of some of the policy types people often choose.

Term life

This is considered a simple form of life insurance. Because its death benefit protection is limited to a specific number of years, its coverage is temporary. If you live past the term, your coverage ends. Term life insurance is considered cost-effective because it is temporary and doesn’t provide additional benefits while you are living.

Universal Life

These policies provide death benefit protection and are designed with flexibility in mind. The policy owner may within certain limits, determine the amount and timing of each premium payment. Policy cash values are credited with interest at a rate declared by the insurance company, which can change from year to year.

Indexed Universal Life

These policies provide death benefit protection and combine the flexibility of universal life with cash value crediting based in part on the performance of an equity market investment index (e.g., the S&P 500® index). Sometimes multiple indexes are used. The result is a flexible policy with enhanced potential for cash value growth.

Variable Universal Life

These policies provide death benefit protection and provide the flexibility of universal life insurance with cash-value growth potential based on the investment performance of a group of variable investment options, which are only available in variable universal life insurance policies issued by life insurance companies. Some of these options are conservative while others can be more aggressive. Because these policies allow the policy owner to choose from many variable investment options, they have more customizable investment potential.

VUL policies are subject to market and investment risk; account growth is not guaranteed and it will change in value. In addition, there is a possible loss of the principle amount invested.

Survivorship Universal Life

These policies provide death benefit protection and are designed to insure two people simultaneously (usually a husband and wife). They pay a death benefit when the last of the two insureds (the survivor) dies. Premiums and death benefits can be managed with the flexibility of traditional universal life policies and cash values can potentially be credited with growth in a variety of ways. Premiums on survivorship universal life insurance policies are often less expensive because death benefits are paid when the second insured dies rather than the first insured.